Cut expenses, lock in interest rates

Phil Kimmel, senior vice president of Farm Credit
Mid-America, offered this and other advice on how to prepare for the future.

While business is steady for most farmers right now, it’s
likely to change in the near future, Kimmel said.

“Right now balance sheets are strong from the appreciated
real estate values and past record earnings for crop prices,” he said. “Their
liquidity is good, and they have probably upgraded their equipment, so their
asset values may be higher.

“This year could still be profitable from selling crops
earlier in the year at higher prices. Looking at 2015 and 2016, there are
challenges from an earnings standpoint, as well as what they should do from a
borrowing standpoint.”

In recent years, farmers’ mindsets have been, “What can I do
to maximize yields?” In 2015, mindsets may change to, “What can I do to minimize
expenses?”

What To
Do First

“The first marketing decision the farmer needs to make for
2015 is when they buy their inputs this year,” Kimmel said. “They need to think
about how to reduce input costs.”

It’s also a good idea to have a conversation with your
lender. Discuss where you are today, what impacts grain prices could have on
your operation and what adjustments you may need to make.

Start thinking about options today before you’ve run out of
them, Kimmel said.

His top three pieces of advice for farmers are:

* Thoroughly and objectively evaluate expenses.

* Lock in interest rates if you have not already.

* Be on the lookout for opportunities to market gain when there’s an
up-tick.

Big
Data

Kimmel has worked at Farm Credit Mid-America for 38 years.

He remembers coming across loan applications from the 1930s.
Each included a list of cows, including their individual names — Molly, Sally,
Betsy.

Newer ways of collecting and storing data have changed the
business.

“Technology allows us to change a lot of processes,” Kimmel
said. “Processes will continue to change. We’re planning to utilize more of the
information that we have on a macro basis, to help us make decisions on
individual loans.”

Technology help us improve so we can better serve the
customer, he said.